SABYASACHI MUKHARJI, J.

( 1 ) THIS is a reference under Section 66 (2) or the Indian Income-tax Act, 1922, for determination of the following question :"whether, on the facts and in the circumstances of the case, the sum of rupees one lakh, eleven thousand, seven hundred and seventy-nine, said to have been forgone by the assessee as managing agency commission was allowable as a revenue expenditure under Section 10 (2) (xv) of the Indian Income-tax Act, 1922, for the assessment year 1954-55? "

( 2 ) THE assessment year concerned in this reference is 1954-55, the corresponding previous year being the financial year ended 31st March, 1954. The assessee, the Birla Bros. (Gwalior) Ltd. (now Birla Gwalior Private Ltd.), is a private limited company and acts as managing agents of several other limited liability companies. Under the managing agency agreement between the assessee-company and the managed company, the assessee-company was entitled to receive a commission @ 12 1/2 per cent. on the net profits of the managed company together with a sum of Rs. 18,000 for office allowance. The accounting year of both the managed company and the managing agents ended on the 31st of March, each year. On the basis of the calculations of the net profits earned by the managed company, pursuant to the agreement between the parties, the managing agency remuneration that the assessee-company would have been entitled to for the assessment year 1954-55 was Rs. 1,11,779. For the accounting year ending on 31st March, 1954, the directors of the assessee-company passed a resolution on 8th November, 1954, agreeing to forgo the commission due to the assessee-company. The managed company's accounts were passed by the auditors on 4th December, 1954, and later adopted in the general meeting. In this year the commission was agreed to be given up by the assessee-company before the accounts of the managed company were finally made up.

( 3 ) DURING the course of the assessment, for the assessment year 1954-55, the assessee claimed that the amount of the managing agency commission which had become due to it from National Bearing Co. Ltd. , at the end of the previous, year should not be included in its total income as the assessee had agreed to forgo the amounts on grounds of commercial expediency. The Income-tax Officer held that the managed company had earned a substantial profit. He was of the opinion there could be no valid reasons for the assessee agreeing to give up the commission it was entitled to. He, therefore, added back the commission due to the assessee-company @ 12 1/2 per cent. on the net profits of the managed company for this year and added back the amount of Rs. 1,11,779 to the assrssee's total income for the assessment year 1954-55.

( 4 ) THE assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner was of the opinion that the managing agency commission has accrued to the assessee at the end of the accounting year. The Appellate Assistant Commissioner, therefore, was of the opinion that such remuneration had accrued to the assessee as its income and the voluntary forgoing of the commission amounted to a gift by the assessee of the income that had already accrued to it. The Appellate Assistant Commissioner further held that, as the managed company had made sufficient profits, it could not be said that the waiving of the commission was with a view to nursing the investment in the hope of better future yields. He, therefore, upheld the order of the Income-tax Officer.

( 5 ) THERE was a further appeal before the Income-tax Appellate Tribunal. The appeals in respect of the assessment years 1954-55, 1955-56 and 1956-57 together with the appeals for the assessment years 1953-54 and 1957-58 were heard and disposed of by a consolidated order dated 3rd July, 1962.

( 6 ) AS a good deal of controversy has arisen in this case on the question of what was actually decided by the Income-tax Appellate tribu

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